Gold prices rose sharply in the first session of the week as market sentiment improved, but inflationary pressure is still limiting the recovery momentum of the precious metal group as investors continue to adjust interest rate expectations.
In the latest report, experts from Heraeus - one of the world's leading refining and trading groups for precious metals - said that gold prices have continuously decreased in the past week despite positive signals from the market. However, precious metals have rebounded after investor sentiment improved and safe-haven demand gradually recovered.
However, inflation is still a significant pressure factor on gold.
According to Heraeus, the US consumer price index (CPI) increased by 4.2% in May compared to the same period last year, higher than the inflation target of the US Federal Reserve (Fed).
Meanwhile, core CPI increased by 2.9% compared to the same period last year. Although the monthly increase was lower than forecast, the market still believes that the Fed may have to maintain a cautious monetary policy for a longer time to control price pressure.
Experts at Heraeus said that the Fed is forecast to keep interest rates unchanged in the meeting on June 17, but the market is still assessing about 60% of the possibility of at least one rate hike before the end of the year.
Despite the high interest rate environment, gold buying demand from central banks continues to play an important role in supporting the market.
According to Heraeus, the People's Bank of China (PBoC) bought an additional 9.95 tons of gold in May, marking the 19th consecutive month of increased gold reserves. China's total gold reserves currently reach 2,331 tons, an increase of 23.6 tons since the beginning of the year.
In addition, central banks around the world also returned to net buying in April after selling heavily in the previous month. Poland was the country that bought the most gold in the month with 14 tons, raising the total purchase volume from the beginning of the year to 45 tons.
The gold accumulation trend of central banks is further strengthened by the latest annual survey by the World Gold Council (WGC).
Survey results show that 45% of foreign exchange reserve managers expect to increase their gold holdings in the next 12 months, the highest level ever recorded and up 2 percentage points compared to the previous year.
Among the 74 central banks participating in the survey, 54% said they would maintain their gold reserves, while only 1% expected to reduce the proportion of gold.
Mr. Shaokai Fan - Head of the Central Bank Department of the World Gold Council (WGC) said that central banks still maintain strong interest in gold and recent price fluctuations have not changed their reserve strategies.
According to the WGC, although gold buying demand from central banks in 2026 may decrease by about 15% compared to the previous year in volume, the buying level is still forecast to be significantly higher than the period before 2022 and continues to be an important supporting factor for the market.
The survey also shows that 93% of central banks currently hold gold, a sharp increase compared to 81% last year.
When asked about the reason for owning gold, up to 90% of survey participants said that the ability to maintain value during instability periods is the most important factor. The next most chosen reasons include the role of preserving long-term value and the ability to diversify the reserve portfolio.
In addition to increasing gold holdings, many central banks are also adjusting their storage strategies. About 9% of survey participants said they have increased domestic gold storage in the past 12 months, while 10% have diversified storage locations abroad.
On the silver market, Heraeus said new supply from Mexico could contribute to increased production in the coming years.
Minera Frisco Company is implementing a new silver mining project and is expected to start contributing output from 2027. The first phase of the project aims to produce about 30 million ounces of silver equivalent.
In addition, this enterprise is also restarting the San Felipe project and is expected to go into operation from the end of June this year.
However, the outlook for silver is still affected by the high interest rate environment.
Experts at Heraeus believe that the market's maintenance of high interest rate expectations for a long time is weakening investment demand for silver. In addition, the prospect of slowing economic growth may also affect silver demand in the industrial sector.
Silver is both a precious metal and an industrial metal. Therefore, high interest rates not only affect investment demand but can also impact production demand if the economy weakens," the expert group said.
The latest data shows that although gold prices still face many challenges from inflation and monetary policy, persistent buying power from central banks around the globe continues to be one of the most important pillars of the precious metals market.
